SAP & ERP Consulting from the Customer Point of View

SAP Project Success

In all the years I’ve been involved with SAP I’ve often puzzled about what makes a really good project rather than some of the freak shows they call SAP projects.  After involvement in over 20 SAP projects I’ve seen a few of them go really well, a few that were more like horror shows, but most were mediocre.  I’ve often asked myself “Why?”  What makes the difference between a good project and one that is nothing short of a mess?

One key item that stands out is project management.  Even with the most talented and dedicated resources bad project management can ruin an otherwise great SAP project.

I don’t blame client project managers because if they had all of the resources they would not need outside help and guidance.

Before I get into this, let me define what I consider a “good” project.  A good project is one where there is a lot to do, but the stress level is not intense.  The timeline may be tight but it is achievable (maybe a little bit of a stretch).  The project is delivered on time, on budget, within scope and the result is high quality (a fairly smooth transition without a chaotic go-live).

Methodology Considerations for a Good SAP Project or SAP Program

The list below is from a synthesis of materials from SAP’s ASAP methodology, the PMI (Project Management Institute), and my personal experience over the years.  Much of this is contained in the SAP ASAP methodology in one form or another so you really have to wonder what any consultant is following if they claim to use it and these items are lacking.  In fact the latest ASAP Methodology version 7.1 includes a project start-up checklist to ensure key components are addressed.

Unlike several years ago when contract project managers had to rely on experience alone – the SAP ASAP Methodology is well-proven and mature today.

There are several key characteristics of a well managed SAP project which includes:

Early SAP Project or Program Management Activities (Before the Overall SAP Project is Fully Underway)

• Success criteria defined and communicated for the project.
• One of the first things that is defined for the project are the key roles, responsibilities, and tasks that will be performed by each participant group in the project.
• A clear, definitive project plan with WBS elements, networks, and activities planned for every major work-stream throughout the entire timeline.
• A clear list of deliverables, milestones, templates, and instructions on their usage are provided for the entire project.
• Deliverables are clearly tied to project value rather than useless administrative exercises (value added activities) (see SAP System Vendor Project Success Criteria & Factors 1 scroll down to Sections 8 and 9).
• Scope, time, issues, risk, cost, communication, and integration management plans, together with additional key components are defined.
• Various standards for the project are defined and documented, including but not limited to business process, development, configuration, enhancement, transport management, testing, etc.

If you are using outside contract project management resources and  these items are not substantially in place by the time you start your project you will likely have your timeline and budget destroyed.  Along with the blown schedule and budget your project will also be a pressure cooker filled with stress, anxiety, and frustration. These are also characteristics you find when an SAP project manager or SAP program manager is not qualified.  The chaos, tension, stress, and confusion caused by their inability to coordinate the many moving parts of the project are a direct result of their lack of experience and ability.

I don’t blame client project managers because if they had all of the resources they would not need outside help and guidance.

The project should be delivered on time, on budget, within scope and with high quality…

Conclusion on Effective SAP Project or Program Management Practices

You are headed for a project disaster when a contract SAP project manager or SAP program manager fails to ensure the following items are in place early in the project:

• responsibilities by group and role are defined,
• deliverables are well laid out,
• templates are properly prepared,
• forward looking expectations are set,
• coordination occurs between all project groups,
• etc.

I’ve only ever been on a few projects when the SAP project manager or SAP program manager failed to produce a properly detailed project plan.  Every one of those projects had one thing in common, they were absolutely horrendously stressful, difficult, and took more time and cost more than necessary.  Along with the failure to produce a proper project plan the lack of proper deliverables, proper roles and responsibilities, and all of the other things a good project plan would help you define were also missing.  If this happens to you FIRE those contractors, you are being bled dry and are headed for a budget and timeline disaster.

For much more detail on what happens when you have bad contract SAP project managers or SAP program managers see the post Some Reasons SAP Projects are Over Budget and Over Time.

Related Posts:

• More SAP Project Leadership Tips for Managing Conflict
• 5 Leadership Tips for Successful SAP Project Management
• SAP Project Manager – SAP Program Manager, Lessons from the Trenches
• SAP System Vendor Project Success Criteria 1
• More on Vendor Selection Criteria and Methods for ERP Project Success

SAP Business Convergence

I only have a couple more posts in my series on overcoming vendor sales tactics so I thought I would provide a brief distraction and look at a few key areas for SAP organizations to move to “excellence.”  This post focuses on some of the considerations for SAP Total Cost of Ownership (TCO) and SAP Return on Investment (ROI).

One key to achieving SAP ROI is through convergence or integration of the SAP staff into the business.  I’ve started down this path as part of a follow-up to the recent ASUG Atlanta conference presentation I did on “Beyond Business to IT Alignment – Creating Convergence in the SAP Enterprise.”  Those materials are now available online.  The first part of them consists of a two-piece resource kit, and the Roadmap Builder, can help to transform your enterprise and business prospects.

• ASUG Presentation on SAP / IT Convergence @ http://bit.ly/kLei7S
• Beyond Technology Alignment – Building a Center of Excellence @ http://bit.ly/jJefxP

Preparing the SAP and IT Organization for a Center of Excellence

This post will provide an overview of ways to achieve business benefit, reduce costs, and achieve ROI.  While I would like to go into detail for each of these components it is best to leave them in a list format.  To expand on them would create a 20 or 30 page document.

Your goal is to drive business innovation and marketplace differentiation

So, to keep things simple I will condense this down into a bullet-point list covering the 3 key topic areas of

1) Engaging the Business,

2) Reducing Complexity, and

3) Delivering Excellence.

The SAP Organization Must Engage the Business

• Converge IT and Business efforts
  • Regularly convene a senior business representative steering committee
  • Facilitate business and IT planning sessions
  • Use business resources to help manage the project
• Develop dotted line IT staff to business organization relationships
  • Assign one or more IT staff to each business area
  • Have IT / SAP resources work in the business areas on a regular basis
  • Ensure they perform some of the routine tasks in the business area
  • Develop improvements, solutions, or ideas in conjunction with business users
• Create Service Level Agreements (SLAs) for post production activities
  • New feature or functionality requests
  • System performance and uptime
  • Issue escalation and resolution
• Build Technology Solution Roadmaps
  • Define and prioritize technology requests
    • Need
    • Want
    • Market impact
    • Strategy impact
    • Business area(s) impacted
  • Perform cost / benefit analysis
  • Evaluate alternatives

The IT and SAP Staff Must Reduce Complexity

• Consolidate
  • Hardware
  • Applications
  • Network infrastructure
  • Application delivery infrastructure
  • Interfaces
• Decommission legacy systems
  • Reduce license management
  • Reduce technical support costs
  • Reduce interfaces
  • Improve data consistency
• Reduce custom solutions – clear custom development

The SAP and IT Organization Need to Deliver Excellence

• Lean implementation
  • Use SAP Solution Composer
  • Use SAP Solution Manager
  • Employ ASAP methodology
  • Leverage vendor templates where they are useful
• Optimize performance
  • Make use of automated batch jobs for repetitive transaction tasks
  • Use performance and monitoring tools
  • Create additional database indexes where useful
• Use QA processes to ensure Quality results
  • Ensure all project code is QA checked
  • Perform project QA’s at key milestones
  • Ensure deliverables are complete and useful (if they are not value added they are a waste of time)
    • An example of a wasted deliverable is something that serves only administrative “reporting” functions.
  • Ensure testing is thorough and challenge testing is performed
• Employ proper IT Governance Principles
  • Ensure proper standards are created and then followed
  • Evaluate, review, and escalate as necessary
  • Ensure key decisions are time bound
  • Be prepared to transition to support at go-live
  • Create issue and risk management processes
• Ensure knowledge transfer
  • Make sure that company IT or business staff can support the solution
  • Ensure end user training is thorough
  • Send IT or business support staff to SAP courses (pay now or you will pay far more later)
  • Use post production learning and improvement sessions

Conclusion on Reducing SAP TCO While Realizing SAP ROI

Customers who are either considering or undergoing an SAP project must perform due diligence to ensure they get what they are paying for.  Not only do you have to evaluate cost savings, but the cost of ownership (software, ongoing support, and maintenance costs).  Together with that it is important to ensure you get some business value from your SAP investment.  More than just promises it is important to define, develop, and then measure success criteria after the SAP implementation.

To make things even more complicated your SAP and IT support staff must work to become directly integrated into the business.  Your goal is to drive business innovation and marketplace differentiation.

Related Posts:

• Using Your SAP Steering Committee for Business Transformation
• SAP Offshore Development Project Experience
• Industry Specific SAP Consulting vs Deep SAP Application Experience
• More on Stupid SAP Vendor – Partner Selection RFI-RFP Processes
• Tactics, Strategy, ROI, TCO and Realizing Business Benefit from SAP

Business software negotiations

As we get close to wrapping up this series we will take a short look at ERP and business software licensing.  There are a lot of things to consider here and a number of strategies you can use in negotiating your licenses.

One thing to keep in mind here is that there are two revenue streams for the software provider.  The first is the license sale and the second is the maintenance agreement.

ERP – SAP – Business Software Licensing Negotiations

One negotiating tip I learned a long time ago is to always, always, always ask for more than you really need or want.  And I don’t mean in the form of the number of licenses or the amount of maintenance.  What I mean are the concessions you want the vendor to provide.  These are your negotiation “bargaining chips.”

It is always easier to give something up than it is to take something back so if you start from a position where you have several “throw away” items you will find yourself with a decent bargaining position.

• Software is licensed, not purchased.
• Determine “End Game” strategy for licensing
  • This Starts “Hard” Negotiations
  • Time is on Your Side – end of fiscal year and end of quarter negotiations are best because of pressure to meet sales goals
  • Use a “give and take” approach, or a “good cop, bad cop” approach on the vendor(s)
  • Carefully evaluate their sales approach
    • Telegraph to the vendor your willingness to “walk away” from the deal if the right agreement cannot be reached
• What are the different payment terms?
• Consider “tiered” licensing options
  • License “stage” commitments – # of initial licenses for developers / system users during setup, and then additional # of users at actual go-live only to be paid for when the system goes live.
  • Ask vendors for interest free licensing options
• Down payment requirements?
• How are software modifications addressed in the license?
• Sticker shock?

ERP – SAP – Business Software Maintenance Negotiations

Software maintenance fees can be a real challenge to negotiate.  This is one area where many software providers have a number of tactics they use to maximize your long-term payments to them.  One large vendor will just about give their software away, and even entice you with a one or two year, low maintenance fee agreement, and then “let you have it” just as the business and software have started to stabilize.  Right at the peak of your dependency on them they will suddenly balloon maintenance fees into the stratosphere.

• How much is the annual maintenance fee?
  • What are the maintenance options?
  • What if you go off maintenance?
  • Is technical support included?
  • What kinds of technical support and how frequent (Phone, e-mail, fax, online messages, etc.)?
• Negotiate any maintenance percentage of the software at the price you purchase it for, not at the list price.
• Link fee increases to standardized economic indicators like the Employee Cost Index (ECI), Consumer Price Index (CPI), Factory Orders Report, Purchasing Managers Index (PMI), etc.  If you expect an inflation spike or economic downturn the PMI or Factory Orders would likely provide the best hedge here.
• Lock in the rate for the entire duration of the contract to avoid “shock increases” as time goes on.
• Require free license upgrades to any new version(s) of software as part of your maintenance.
• What about Source Code?
• Even after you make the final software selection decision, consider license negotiations with both of the top finalists to use as “buy down” leverage against the real selection
• Try to negotiate contract language with caps or limits on how much or how quickly fees can increase.
• Every publicly traded software vendor has strong market incentives at the end of their quarter to make any deal they can to increase revenue (often times regardless of the margins) so be patient!
  • At quarter ends the larger software vendors may resist cutting maintenance percentages but may be much more inclined to provide great deals on licensing.  As long as the maintenance is tied to the negotiated license cost then this is the same as getting a maintenance discount.
• Seriously consider hiring a professional consultant who specializes in software negotiations.

Final Thoughts on SAP – ERP – Business Software Negotiations

Make sure your contract agreement does not contain “penalty” language if you decide to discontinue and then renew maintenance.  For example some contracts include provisions that if you stop maintenance and then re-start you will have to pay some amount of “make up” maintenance for the period you discontinued.

Probably the most important component of your negotiation strategy is patience.  You ALWAYS have the option of walking away and pressing for serious concessions if the vendor wants your business.  Believe me, you CAN wait them out.  Be willing to wait as long as it takes to get the terms that are right for you but it is also important to be reasonable and fair. In the end everything is negotiable.

Related Posts:

• Overcome SAP-ERP System Integrator Sales Tactics 6
• Overcome SAP-ERP System Integrator Sales Tactics 5
• Overcome SAP-ERP System Integrator Sales Tactics 4
• Overcome SAP-ERP System Integrator Sales Tactics 3
• Overcome SAP-ERP System Integrator Sales Tactics 1